(Reuters) – Global rating agency Moody's (NYSE:) revised Kenya's outlook to “positive” from “negative” on Friday, citing a potential ease in liquidity risks and improving debt sustainability over time.
The eastern and African country has been struggling with severe debt and searching for new financing lines since last year due to nationwide protests against proposed tax increases.
The report said that domestic financing costs have begun to decline amid a monetary easing cycle and may continue to do so if the Kenyan government actually manages its fiscal consolidation, and opens its doors to external financing options.
“Given low inflation and a stable exchange rate, there is potential for further reductions in domestic borrowing costs as previous monetary policy rate cuts pass through lower longer-term borrowing costs,” Moody's said.
The agency added that a new IMF program will boost Kenya's external financing, while other multiple creditors such as the World Bank will remain important sources of financing, even without IMF financing.
The agency affirmed Kenya's long-term domestic and foreign issuer ratings at 'CAA1', citing high credit risk driven by weak debt sustainability and high overall needs for financing options.
